Financial System in Brazil

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Mortgage Companies 18

Foreign Exchange Brokers 38

Saving and Loan Companies 2

Consortium Management 412

Mutual Investment Funds 3,812

Total: 6,130

Source: The Central Bank of Brazil (August 1999)

- Clearing System

The settlement of financial operations registered in Brazilian Financial Market are executed by some authorized institutions, depending on the kind of trade:

SELIC – special system for liquidation and custody of government bonds This electronic system, created in 1979, is used to register open-market operations with public bonds. It is managed for the Central Bank, through SISBACEN system.

CETIP – center for the custody and financial liquidation of private issues CETIP was created in 1986 to guarantee, take custody and settle operations involving private bonds and special public bonds. Also CETIP works as an electronic system that controls operations being linked to SISBACEN in order to settle bank reserves.

CBLC – Stock exchange clearing system This service, linked to São Paulo Stock Exchange, clears operations realized in spot, forward and options markets. The financial liquidation of net balance transactions is realized by CETIP.

BM&F – commodities and futures exchange clearing The operations with commodities and futures markets are cleared in this system, based in São Paulo, which offer special devices to guarantee trade. The financial liquidation of net balance transactions is realized by CETIP.

COMPE – system of liquidation of checks and other documents COMPE is managed by Bank of Brazil. COMPE clears those transactions in the financial system and informs the BCB, in order to settle bank reserves.

CAMBIO – foreign exchange system This system is integrated to SISBACEN and clears transactions involving foreign currencies. One leg (R$) is automatically processed in bank reserves and another (the foreign currency) is liquidated by a correspondent bank abroad.

- REGULATION

3.1 The National Monetary Council (Conselho Monetário Nacional – CMN)

The CMN is the major entity in the Brazilian Financial System. It is the composite for the Finance Minister (President), Budget Minister and the president of the Central Bank. The main responsibilities of the CMN are:

a) To coordinate the monetary, credit, budget, fiscal and debt policies.

b) To oversee the liquidity and solvency of financial institutions.

c) To promote the improvement of Institutions and financial instruments.

3.2 The Central Bank of Brazil (Banco Central do Brasil – BCB)

The central executive institution of the financial system. The main responsibilities of the BCB are:

a) To execute monetary policy.

b) To control foreign capital flow.

c) To control credit risk of the financial system.

d) To supervise the financial institutions in the intermediation and clearing systems.

3.3 Other Regulatory Institutions

Comissão de Valores Mobiliários – CVM (Securities and Exchange Commission). CVM is the normative institution of the financial system, specially dedicated to development, discipline and inspection of the security and the stock market.

Superitendência de Seguros Privados – SUSEP (Private Insurance Agency). SUSEP is responsible for the control and inspection of insurance companies, open private pension funds and capitalization market.

Secretaria de Previdência Complementar – SPC (Complementary Pension Secretariat). Agency of Social Security Ministry, responsible for the control and inspection of the close private pension funds.

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